Trump Tax Plan, Cuts and Changes in 2017, 2018 and Beyond

37 comments

[Latest update]  With the focus on repealing and replacing Obamacare, the Republican controlled Congress and Presidency have not had much time to enact their tax reform plans outlined below. Based on recent news the Trump administration however is still targeting this year to get some kind of tax reform package enacted. But until a unified health care bill is passed or indefinitely put on the back burner, tax reform won’t get the focus it needs. There are however some potential signficant tax changes/roll-backs under the proposed health care reform bills such as:


  • Remove the individual mandate, which imposes a tax or penalty for not having health insurance in a given year
  • Provide tax credits ranging from $2,000 to $14,000 based on age, filing status and income levels to help cover the cost of obtaining private health insurance
  • Removal of the 3.8 percent additional tax on investment income for individuals making $200,000 or more ($250,000 for couples). This was used in part to fund Obamacare subsidies

Again, the above tax changes are tied directly to passage of a unified health care bill – both the house and senate currently have different versions. If the health bill is unable to pass Congress then tax payers will need to rely on the proposed tax reform package for any future tax breaks or credits.

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[Updated April 2017] Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn have provided more details and updates to President Donald Trump’s campaign tax proposal (see previous updates below). This includes the following:

  • The updated tax proposal eliminates all itemized and regular deductions (including items like home office deductions, state and local) that are part of the current tax code, except for mortgage interest and charitable deductions.
  • The standard deduction will be doubled to offset the elimination of other deductions and is line with goals to simplify the tax filing process and usage of itemized deductions.
  • Repealing the alternative minimum tax (AMT), 3.8% health care investment tax imposed under Obamacare  and the the estate tax (a.k.a.“death tax”)
  • Trump’s tax plan still has 3 tax rate brackets (vs. 7 today), but the levels have changed from the prior proposal. They will now be 10%, 25% and 35%. This also means that the top tax bracket rate of 39.6% will be eliminated.
  • No taxes will be due on the first $13,000/$24,000 (single/married standard deduction) of income.
  • The Tax plan includes, but no numbers were provided, tax relief for families with child care expenses.
  • Business Taxes – The corporate rate will fall to 15% and there will be a one repatriation tax on funds companies hold overseas.
  • Assumption is that higher economic growth will offset lower tax revenues. However details for this spelled out over the next year as the tax reform package is worked through Congress.

While the plan does appear to have tax breaks for the rich (eliminate investment and estate taxes), the administration is saying that other tax changes would ensure the plan would largely help the middle class. More to come, but please share your thoughts below.

Trump Tax Plan Update

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[Feb 2017] With President Donald Trump and Republicans controlling the House and Senate, we are likely to see a number of tax changes in the year ahead if his campaign plans and promises hold. As with everything else, the Trump administration was light on the details but here is what we do know about the proposed Trump tax plan:

  • Federal tax rates and brackets would be simplified down to three versus the seven today. Those with a taxable income between $0 and $37,500 ($0 to $75,000 for married filers) would be subject to a 12% tax rate, taxable income between $37,500-$112,500 (or $75,000-$225,000 for married filers) would be subject to a 25% rate. While those with taxable income above $112,500 ($225,000+ for married filers) would be subject to a 33% federal tax rate.
  • The standard deduction would more than double to $15,000 for single filers to $30,000 for married couples filing jointly while ending personal exemptions. This increase along with the lower tax brackets would see federal taxes due go down for most Americans.
  • Itemized deductions would be capped at $100,000 for single filers and $200,000 for married couples filing jointly. This is down from current levels and in line with Trump’s goal to simplify tax rules and prevent the rich from taking legally gray deductions.
  • To promote small business investment Trump would eliminate the 3.8 percent tax on net investment income on people with incomes (MAGI) of over $200,000 for single filers and $250,000 for married filers. The tax rates on long-term capital gains would be kept at the current 0%, 15% and 20%. In a hit to hedge fund managers, there is also a proposal to taxing income from carried interest at ordinary income tax rates.
  • A full repeal the alternative minimum tax (AMT) and the estate tax. Under current law, estates valued at more than $5.45 million are subject to a 40% tax rate. Cutting the AMT and estate tax would stand to benefit higher income earners the most.
  • The individual mandate (or Obamacare tax as some call it) would also be repealed in 2017, meaning that penalties would not result if people don’y have health insurance.
  • The corporate/business tax rate will be lowered from 35% to 15% to become more competitive globally. To encourage the repatriation of earnings being kept by American multinationals in overseas banks, subject to lower local corporate tax rates in those countries, the Trump administration will only subject these funds to a lower 10% corporate repatriation tax rate.

[Update Mar 2017] Following a meeting with business leaders President Trump announced that a major release on details behind his tax reform package is on tap for the coming weeks. Details will be provided covering “comprehensive tax reform both the business side of the tax ledger as well as the individual rates,” according to follow up comments from press secretary Sean Spicer. No exact date was given for release of this information, but Trump indicated it would be “over the next two or three weeks [end of February]…and would be phenomenal in terms of tax….with significant tax reductions.” He went on to say that the tax reforms he is proposing (see below) will, “… lower the overall tax burden on American businesses big-league“.  However, until the Obamacare repeal and replacement bill is resolved, it is unlikely we will see much more on tax reforms. My guess is that it will take till Summer before we see more details on the Trump tax reform plan.

While they may get passed by Congress, a lot of Trump’s tax changes won’t go into effect until 2018, since 2017 tax rates and brackets have already been established. Further, the House Republicans (under Paul Ryan) also have an alternative tax plan which while also looking to cut corporate and personal taxes, is not as aggressive as the proposed Trump tax plan.

So in order to get wide scale tax reform passed across all branches of government there will need to be some sort of compromise tax plan agreement. The Trump administration also hasn’t laid out any real plan to pay for these tax cuts and proposed no net spending reductions to offset his tax plan’s $7 trillion cost.

Under a Trump tax plan middle class tax payers would likely see modest tax savings, while those in highest income ranges would actually see the most in savings given the lowering of the highest marginal tax rate, increase in standard deduction and repeal of the AMT. Under proposed Clinton plans middle income earners saw more tax savings while higher income earners were taxed more heavily.

I encourage you to share this article and connect via Facebook or Twitter to get the latest updates and news related to Trump’s tax reform proposals.

{ 37 comments… read them below or add one }

Gary Thurston June 6

My question is, are we retirees on SS gong to receive a raise in our Social Security checks in 2018? Also if we do will the government figure away to take it away from us. Our last was given from the federal and taken away by the state. We need something we can put on the table.

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Crystal May 30

I am tired of being low income and even having a child to claim with our family of 3 and income of only 40,000 we paid in over $4,000 in federal taxes out of our paychecks and still owed the IRS almost $500.00 and I already cannot afford to have more taken out of our paychecks so it would be really nice if the standard deduction was higher and this plan that Trump has might help us cause we all work full time jobs here at my house but live in a lower income area and its not right that people who barely work get huge tax returns while those of us that work and pay in still end up owing money.

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Jen May 22

We are in the 10% group and the proposed tax reform will more than double our tax liability.

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Rochelle May 17

I am expecting my taxes to go up. I am single and my itemizations were > $25K last year so the new standard deduction for a single doesn’t help. So I lose many deductions and the personal exemption. I voted for Trump but unless that 10% tax bracket covers a large range of incomes, I’m in deep doo-doo.

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Dee May 11

Why is retirement income considered “unearned income” and why do I have to pay taxes on it? The IRS counts this as income, but not earned income, therefore no earned income tax credit. Obviously the retirement income was earned. It wasn’t given to me, I earned it.

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Brandi April 28

This is only to make the rich richer and the poor poorer!!! I like most sinlge mothers that barely make 24,000 a year look forward to taxes to catch up on past due bills… and now Trump sets it up to where the poor has to pay more and the rich pays less!!! How does that make sense?? Trump is leading the rich to better things and the poor to live on the streets!!! TRUMP IS RUINING AMERICA ALREADY!!!!

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Allen April 30

What do you mean that you use taxes to catch up on bills? Under Trumps plan, you would barely pay $1000 a year in taxes!!! I think you meant to say that you get money back from the Government instead of paying in. This is what is wrong with our country, everyone with their hands out looking up wanting something for free.

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Debbie May 2

What she means is she gets free money every tax season. Credits under Obama tax plans which could add up to $5-10K “refund” depending on if she has kids. FREE MONEY to her. This isn’t a refund its just a hand out. A refund is a return of what you pay. This is just gift money. A tax burden to us. THIS is what needs to stop.

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MIhopes May 4

You do know earned-income taxes are not legally required right? Business and unearned income are required while earned is voluntary according to the IRS rules. The payouts are simply a way to get more people to file in hopes of them finding they owe. It is all a scam from both sides.

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Wayne June 5

From what I understand you would only be taxed on $11,000 of that $24,000. You would be taxed at 12%. That’s less than what Hillary Clinton and Bernie Sanders proposed. As for someone wanting to pay more you can still do that via w4.

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Matty April 27

what will happen to the disability benefits under his plan. Right now disabled people get $25K off income because of the low income received by social security. Does this plan go away with Trump? If put in higher bracket with no deduction for disability it will be devastating for all disabled.

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Brett March 18

Dont forget you might pay a slightly higher tax % if your in the lower or middle income brackets but your standard tax deduction will go up to $15000 single and $30000 married couples. Helping to offset the slightly higher taxes.

Brett

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Teresa cole March 17

I would go up from 18 percent to 25 tax. Income from married joint filing is to large a gap. 75000 to 225000 pay 25 % so i make $80000 and now will go from 15 to 25% this is no savings for midde income people. The poorest people pay more 12 instead of 10% and rich comes dow from 39 to 33% we need 75000 to 150000 for middle income rste of 17 or 18

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Dee Lema April 27

Most people don’t understand how graded tax brackets work. In Teresa’s case, the first 75k would be taxed at the proposed 10-12% (instead of the current 15%) and she will only pay 25% tax on the amount above $75k. This should be way offset by the lower tax rate on the <75k income and the proposed double standard deduction.

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Matt M May 15

Not to mention it looks like nothing will be owed on the 1st 13,000/24,000 and you still get to take your standard deduction of 15,000/30,000. Teresa would only owe 10-12% on dollars 24,001-50,000. Big difference if I’m reading it right.

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Tina March 13

Jacob2, you are the idiot if you think that Trump is the best option for President. He could care less about you are anyone that is not increasing his personal revenue. People like you, is just like him, because of the ignorant shit that comes out of his mouth on a daily basis. If you are a person who like war and confusion among the american people then join the military and fight! because that is were he is taking this country. He could give a damn about you!!!!

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william April 26

Go figure. More name calling.

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bfccigar@msn.com April 27

You are a dumb liberal! He didn’t have to run but wants to save this country before we look like Venezuela , that’s called socialism!

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Amy Redmond February 21

I think as a working class person myself, I personally am sick and tired of paying for lowlife s and deadbeat and lazy people that’s able to work, I’m also sick of thsee young kids and adults taking advantage of the government but really the government is giving them everything and not the working class people, I think we should get a stimulus package . We deserve something, I for 1 am sick of going to work everyday dealing with bullshit and idiots but guess what , I have morals and bills to pay for, I’m sick of being taxed every week out of my check and also taxed the hell out of on my income taxes, you have money Mr trump so if you going to do something stand up and be a real man and give us working class people something and also let’s tax people by what their income is , how about that. Thank you
Amy Redmond

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T cullins March 25

Thank you Amy.I feel the same way

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Alex McDaniel April 23

Donald Trump is dumb because He is going to cause ww3 and the down fall of our country. Me personally I hate his guts. He shouldn’t have became president because it is nothing but a joke to him. Fuck him , his money and hid planes that are not going yo work

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william April 26

Wow Alex. Everyone said that Obama would do the same thing. But did he? No. Everyone said give Obama a chance before we passed judgment. I did. I waited a full 4 years before I talked crap about him and his policies. Now I use your parties own words on you. “Give him 4 years to see what he can do before you pass judgment.” You can’t have your cake and eat it too.

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Dewtwo May 5

Alex, get an education and a job dude!…

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Jeff S January 23

Funny how Trump keeps talking about cutting taxes and simplifying the system. How about he releases his taxes as well to show how much he has profited (or avoided paying taxes) from the current tax system. Definitely need to simplify things, but Trump will just make the system better for the richest based on this plans. And who will pay for all these tax cuts? Just assuming that growth will offset the lower tax revenue is NOT a realistic plan. Its like saying I can keep spending more because I assume I will earn more forever.

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Jacob February 3

Really I make an small 16000 and under his plan only a thousand will be taxed at twelve percent do your research and quit whining about him not releasing his taxes Boohoo nobody gives a crap what about hitlery erasing he Clinton foundation emails that showed she had 20% of her campaign funded buy the Saudi Arabians who mutilate female genitals for even looking at another man and hurl homos off the roof of the highest building yeah she’s the perfect one for the white house I say…Trump!

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jacob2 February 14

jacob, so sorry to hear the twisted, hateful thoughts coming from your mind. trump and hitler are more similar than anyone else in american history. he is the only person that says “only he” can save us, this on top of him having very little knowledge of how things work in government anyway. not sure why you are so angry at hillary. of course she has contributions from people you may not approve of, do you really think all saudis are the same? just look at how divided we are.

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Jason February 24

Jacob, You are one ignorant twit. Playing the Clinton card is old as hell. Give it up.

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Jake May 24

But it was ok for Obama to blame Bush for 8 years?

Stanford January 14

Any thoughts given to eliminate tax on social security?

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Mike Stefanik February 14

Join the discussion

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Maria Gomez November 21

With this tax structure he will spend more time remembering his rich friends and associates than the low-earning voters who made him their president.

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Ohiodale December 23

You can’t lower taxes on people who currently pay little to no taxes. My taxes will probably not go down but I am more concerned about jobs creation than lowering my taxes. Earning a higher salary is much more rewarding then sitting around hoping the government gives me a little of my money back. I did not vote for Trump to pay lower taxes. I voted for Trump for job creation, fighting terrorism, reversing the racial divide created by Obama, not being politically correct, immigration, and mostly because he is not a bureaucrat who gets rich off lobbyists and tax payers. Trump’s tax plan is all about creating jobs. He is had major tax increases for hedge fund managers and is taking away deductions on the rich. His new tax brackets will help small business owners who create jobs and innovations. Obviously business people like Trump’s tax plan.

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John March 2

Obama created a racial divide? Because all the different races along fine before he came along?

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Brian Morscher April 26

You been hosed, eh?

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JK May 11

I’m uncertain about the job creation aspect. The idea is that injecting a lot of capital into the market will spur growth and hiring. But the thing is…we’ve already done that for the past 8 years. The Fed has pumped trillions in printed money into the market and…growth has remained unchanged.

I like the 15% corporate tax. That should help. But I think both you and Trump are overestimating just how much growth can be gained from capital injection.

And if the “yuge” growth doesn’t happen as brilliantly planned (it’d have to be 10-12%/year as estimated by tax analysts), the deficit will increase significantly. While that’s not a big problem in and of itself, I suspect a lot of Republicans in Congress won’t like that and likely gridlock government yet again just like they did under Obama.

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Skippy November 16

Any talk about when trump takes over. A tax rebate sent out like bush did at first.

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Andy (Author) January 23

He doesn’t talk about a rebate – but there may be some sort of 2017 or 2018 economic stimulus, Specific to taxes, this is what he said in his contract to American pledge (Middle Class Tax Relief and Simplification Act)

“An economic plan designed to grow the economy 4% per year and create at least 25 million new jobs through massive tax reduction and simplification, in combination with trade reform, regulatory relief and lifting the restrictions on American energy. The largest tax reductions are for the middle class. A middle-class family with two children will get a 35% tax cut. The current number of brackets will be reduced from seven to three, and tax forms will likewise be greatly simplified. The business rate will be lowered from 35% to 15%, and the trillions of dollars of American corporate money overseas can now be brought back at a 10% rate”

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